Allegheny Power 2010 Annual Report Download - page 121

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as load serving entities responsible for payment of additional SECA charges for a portion of the SECA period (Green
Mountain/Quest issue). FirstEnergy executed settlements with AEP, Dayton and the Exelon parties to fix FirstEnergy’s
liability for SECA charges originally billed to Green Mountain and Quest for load that returned to regulated service during
the SECA period. The AEP, Dayton and Exelon, settlements were approved by FERC on November 23, 2010, and the
relevant payments made. Rehearings remain pending in this proceeding.
PJM Transmission Rate
On April 19, 2007, FERC issued an order (Opinion 494) finding that the PJM transmission owners’ existing “license plate”
or zonal rate design was just and reasonable and ordered that the current license plate rates for existing transmission
facilities be retained. On the issue of rates for new transmission facilities, FERC directed that costs for new transmission
facilities that are rated at 500 kV or higher are to be collected from all transmission zones throughout the PJM footprint by
means of a postage-stamp rate based on the amount of load served in a transmission zone. Costs for new transmission
facilities that are rated at less than 500 kV, however, are to be allocated on a load flow methodology (DFAX), which is
generally referred to as a “beneficiary pays” approach to allocating the cost of high voltage transmission facilities.
The FERC’s Opinion 494 order was appealed to the U.S. Court of Appeals for the Seventh Circuit, which issued a
decision on August 6, 2009. The court affirmed FERC’s ratemaking treatment for existing transmission facilities, but
found that FERC had not supported its decision to allocate costs for new 500+ kV facilities on a load ratio share basis
and, based on this finding, remanded the rate design issue back to FERC.
In an order dated January 21, 2010, FERC set the matter for “paper hearings”-- meaning that FERC called for parties to
submit comments or written testimony pursuant to the schedule described in the order. FERC identified nine separate
issues for comments and directed PJM to file the first round of comments on February 22, 2010, with other parties
submitting responsive comments and then reply comments on later dates. PJM filed certain studies with FERC on April
13, 2010, in response to the FERC order. PJM’s filing demonstrated that allocation of the cost of high voltage
transmission facilities on a beneficiary pays basis results in certain eastern utilities in PJM bearing the majority of their
costs. Numerous parties filed responsive comments or studies on May 28, 2010 and reply comments on June 28, 2010.
FirstEnergy and a number of other utilities, industrial customers and state commissions supported the use of the
beneficiary pays approach for cost allocation for high voltage transmission facilities. Certain eastern utilities and their
state commissions supported continued socialization of these costs on a load ratio share basis. FERC is expected to act
by May 31, 2011.
RTO Realignment
On December 17, 2009, FERC issued an order approving, subject to certain future compliance filings, ATSI’s withdrawal
from MISO and integration into PJM. This move, which is expected to be effective on June 1, 2011, allows FirstEnergy to
consolidate its transmission assets and operations into PJM. Currently, FirstEnergy’s transmission assets and operations
are divided between PJM and MISO. The realignment will make the transmission assets that are part of ATSI, whose
footprint includes the Ohio Companies and Penn, part of PJM. In the order, FERC approved FirstEnergy’s proposal to
use a FRR Plan to obtain capacity to satisfy the PJM capacity requirements for the 2011-12 and 2012-13 delivery years.
FirstEnergy successfully conducted the FRR auctions on March 19, 2010. Moreover, the ATSI zone loads participated in
the PJM base residual auction for the 2013 delivery year. Successful completion of these steps secured the capacity
necessary for the ATSI footprint to meet PJM’s capacity requirements. On August 25, 2010, the PUCO issued an order in
the 2010 ESP Case approving a settlement that, among other things, called for the PUCO to withdraw its opposition to
the RTO consolidation. In addition, the order approved a wholesale procurement process, and certain “retail choice”
policies, that reflected ATSI’s entry into PJM on June 1, 2011.
On February 1, 2011, ATSI in conjunction with PJM filed its proposal with FERC for moving its transmission rate into
PJM’s tariffs. FirstEnergy expects ATSI to enter PJM on June 1, 2011, and that if legal proceedings regarding its rate are
outstanding at that time, ATSI will be permitted to start charging its proposed rates, subject to refund. Additional FERC
proceedings are either pending or expected in which the amount of exit fees, transmission cost allocations, and costs
associated with long term firm transmission rights payable by the ATSI zone upon its withdrawal from the Midwest ISO
will be determined. In addition, certain parties may protest other aspects of ATSI’s integration into PJM, and certain of
these matters remain outstanding and will be resolved in future FERC proceedings. The outcome of these proceedings
cannot be predicted.
MISO Multi-Value Project Rule Proposal
On July 15, 2010, MISO and certain MISO transmission owners jointly filed with FERC their proposed cost allocation
methodology for certain new transmission projects. The new transmission projects--described as MVPs--are a class of
MTEP projects. The filing parties proposed to allocate the costs of MVPs by means of a usage-based charge that will be
applied to all loads within the MISO footprint, and to energy transactions that call for power to be “wheeled through” the
MISO as well as to energy transactions that “source” in the MISO but “sink” outside of MISO. The filing parties expect
that the MVP proposal will fund the costs of large transmission projects designed to bring wind generation from the upper